Can I get the bill, please?

Submitted by Jean-Christophe Dumont
On Tue, 07/30/2013

co-authors: Thomas Liebig

Are Immigrants a Burden or Net Contributors to the Public Purse?

If you ask your neighbour whether immigrants are a burden or net contributors to the public purse -- what in jargon is called the fiscal implications of migration -- it is more likely that you will get the former response rather than the later. The current doxa about the fiscal impact of migration is indeed that immigrants contribute less in taxes than they receive in benefits and that this ultimately leads to higher taxes paid by native-born citizens. And this goes well beyond anti-immigrant groups.

Because there is a direct correlation between this perception and how people feel about migration, the negative views on immigrants’ fiscal impact risk jeopardising efforts to adapt migration policies to the new economic and demographic challenges that many countries are and will be facing over the coming decades. In this context, it is critical to confront public perceptions with hard evidence.

In the 2013 edition of the OECD flagship publication on migration, the International Migration Outlook[1], we present new evidence on this issue for all European OECD countries, plus Australia, Canada and the United States. We show that although the fiscal impact of immigration cannot be pinned down to a single and undisputable figure - as its measurement depends on many assumptions - the impact of the cumulative waves of migration that arrived over the past fifty years in OECD countries is on average close to zero, rarely exceeding 0.5% of GDP in either positive or negative terms.

Immigrants are thus neither a burden to the public purse nor are they a panacea for addressing fiscal challenges. They have a positive net direct fiscal position in most countries, except in those with a large share of older migrants. This means that they contribute to the financing of public infrastructures although admittedly to a lesser extent than the native-born. Contrary to public belief, low–educated immigrants have a better fiscal position than their native-born peers. And where immigrants have a less favourable fiscal position, this is not driven by a greater dependence on social benefits, but rather by the fact that they often have lower wages and thus tend to contribute less.

Most immigrants do not come for social benefits, they come to find work and to improve their lives and those of their families. Indeed, employment is the single most important determinant of migrants’ net fiscal contribution and raising immigrants’ employment rate to that of the native born would result in substantial fiscal gains, notably in European OECD countries. Efforts to better integrating immigrants should thus be seen as an investment rather than a cost.

As for the prisoners of Platon’s cavern, escaping the illusion and facing the reality is not an easy course. But it is nonetheless necessary to avoid that our intuitions continue to mislead our preferences, including in the field of migration.

The opinions expressed and arguments employed here are the responsibility of the author(s) and do not necessarily reflect those of the OECD.